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Think tank: PH automobile excise tax lowest in Asean


STATE think tank National Tax Research Center (NTRC) threw its support behind the government’s plan to hike taxes on new cars, saying in a report the Philippines imposes the lowest motor vehicle excise taxes in the Association of Southeast Asian Nations (Asean) region.

NTRC said all Asean member-countries impose “excise tax,” “excise duty’’ or an equivalent excise tax-like levy on motor vehicles (MV).

In particular, the Philippines, Lao PDR, Thailand and Vietnam impose excise tax while Brunei, Malaysia and Singapore collect excise duties, it said.


It said other member-countries have their own unique excise taxes — the Specific Tax on Certain Merchandise and Service Tax in Cambodia, Excise Tariff-Luxury Sales Tax in Indonesia and Commercial Tax in Myanmar.

The think tank said all Asean member-countries impose ad valorem tax rates based on the price or value of the MV.

“However, the Philippines is the only member-country that imposes marginal tax rates, wherein said rates are applied on the excess over a pre-defined threshold manufacturer’s or importer’s selling price in the tax schedule (similar to the income tax) while all others directly apply the tax rates to the price or value of the MV,” it said.

In addition, NTRC noted that the Philippines levies a four-tiered excise tax with rates ranging from 2 percent to 60 percent, depending purely on the manufacturer’s or importer’s selling price net of the excise and value-added tax (VAT).

Currently, a two-percent tax is imposed on the first P600,000 of the selling price of the motor vehicle, 20 percent on the next P500,000, 40 percent on the next P1 million, and 60 percent on the excess over P2.1 million.

“The Philippines imposes the lowest minimum rate of 2 percent on taxable MVs compared with 5 percent or 10 percent minimum tax rate in other member-countries,” it stated.

In terms of the coverage of the excise tax, the think tank said the Philippines imposes the tax on “automobiles,” which include any four or more wheeled motor vehicle regardless of seating capacity, which is propelled by gasoline, diesel, electricity or any other motive power.

Buses, trucks, cargo vans, jeeps/jeepneys/jeepney substitutes, single cab, chassis, and special purpose vehicles are not considered as automobiles; hence, not subject to the excise tax, it said.

“Unlike the Philippines which limits its excise tax to any four (4) or more wheeled MVs, eight (8) Asean member-countries namely Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Singapore and Vietnam impose the excise tax on two-wheeled MV such as motorcycles,” it said.

The Department of Finance (DOF) earlier said the restructured excise tax on automobiles is part of the first package of the proposed comprehensive tax reform program it submitted to Congress in September.

The higher excise tax on automobiles, however, does not cover buses, trucks, cargo vans, jeepneys, jeep substitutes, single cab chassis, and special-purpose vehicles.

The reforms covering the automobile excise tax is primarily a shift to an ad valorem system that simplifies the computation of the tax, Finance Undersecretary Karl Kendrick Chua has said.

“Under the proposal, the tax brackets for the manufacturing price or import price can be indexed to inflation once every two years if the US dollar exchange rate [movement] is more than 10 percent. If the movement in the exchange rate is more than 20 percent, then the full movement of the exchange rate will be the basis for the indexation,” Chua said.

Under the DOF proposal, the tax for entry-level cars priced at P600,000 and below would go up from 2 percent to 5 percent, while luxury vehicles priced at over P2.1 million would be taxed 60 percent of the manufacture or import price from the current tax of P512,000 plus 60 percent in excess of P2.1 million.

Chua noted that the car industry has enjoyed a 10-year grace period of no tax increases.

“Even with a doubling of gasoline and diesel price between 2009 and 2011 to close to P45 and P60 per liter, automobile sales continued to grow strongly,” he noted.

The progressive tax system would have greater impact on the top 10 percent of households in terms of income, and increasingly the top 1 percent, Chua further clarified.


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